Market Leverage Hit a New Record in January -3

09:29 20-Feb-26

PCE numbers for December are out, three weeks late due to the shutdown.  Both the headline and Core were +0.4%, a tenth higher than forecast.  Spending was +0.4% one or two tenths higher than various forecasts, while Income was largely in line at +0.3%.  American equity futures were already down before the report as the data below made it clear the market still had plenty of potential deleveraging in front of it.  They deteriorated further, as this points to the Fed either having more work to do on inflation, or looking ever more precarious on the stagflation tightrope, depending on one's view of the economy.

Just released market leverage jumped to 6.5x in January, higher than at any other point on record.  There's no silver lining either.  Debt balances climbed as funds in both margin and cash accounts fell.  It's easy to imagine cryptocurrencies having something do with this, but the powers that be are going to keep piling on as long as there is a trade to made.

American prices for natural gas and electricity both rose, but the latter rose more.  I expect it to continue catching up, especially while the data center spending that I documented this morning continues.  I see this as related to the cryptocurrency trade mentioned above.  Power supplier stocks on both sides have benefited as predicted and shown by individual stock coverage in our parent CrowdWisers service.

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